Is It Time To Remortgage Your Home?

Did you know that around one-third of all loans in the UK are actually remortgages. That’s because a mortgage is often tailored to the needs of your current situation, and so better mortgages can become available as your circumstances change.

So, is it time to remortgage?

Yes, it’s time to remortgage if…

Your current deal is coming to an end. A fixed-rate mortgage only lasts for a couple of years, after which it changes to have a standard variable rate (SVR). If this has happened to you and your mortgage has changed, you may find yourself paying significantly higher interest rates than those you originally signed up for. Thanks to the increase in interest rates, your mortgage will no longer be the cheapest rate available to you. According to The Loans Departement People who chose fixed-rate mortgages often find themselves jumping from mortgage to mortgage, so perhaps you should follow suit and find yourself a better deal.

You want to increase the size of your mortgage. There are multiple reasons why you’d like to increase the size of your mortgage. Firstly, it could be because you’re looking to do home improvements and need the extra cash. Alternatively, it may be because you want to start your own business and need some extra funds to get things going. Depending on your reason for wanting to increase your mortgage, lenders will be more or less comfortable with accepting your mortgage request. It will also impact the terms and conditions surrounding your mortgage and the repayment rate you’ll be expected to pay. 

Another way of increasing the size of your mortgage is by consolidating your debts. This is a great way to avoid late payment fines from multiple lenders and put all of your debt in one place. If you’ve been having difficulty paying off debts in the past, it may be more difficult for you to remortgage as lenders have access to your income and outgoing finances. However, that doesn’t mean a bad credit remortgage is impossible. There are dedicated mortgages available to those with a less than perfect financial history.

 You’d like to have less outstanding debt. If you find yourself in a better financial position than when you initially took out your mortgage, a better rate may be available to you. This could be because you’ve had a pay rise, or one of your dependents (i.e. children) has grown up and is taking care of their own finances. With more disposable income, you may decide that you’d like to funnel this money into reducing the amount of mortgage you have left to pay. Some mortgage providers will let you do this, so you don’t need to remortgage. However, the amount of equity you have in your property will have most likely changed since you first took out your current mortgage, so you may be able to get better rates by remortgaging your home.
Alternatively, it may be that you’ve inherited a significant lump sum and want to put this straight towards paying your mortgage. Some lenders will have a limit on the amount you’re able to pay in one go. Therefore, you may need to go through the process of remortgaging to simply hand your large pile of money to another provider. 

Finances have dropped, so you’d like to decrease payments. When you or your partner retire, it’s likely that you’ll have less income at your disposal. If you still have mortgage, you may need to get a new deal that is more financially viable. You may also need a lower repayment rate if you’ve suffered from a long-term injury that effects your ability to work or if you’ve been made redundant. Some mortgage lenders may be sympathetic to your change in circumstances, but if the amount of equity you have in your property is rather different to what it was when you first took out your current mortgage deal, it may be worth remortgaging.

 No, now is not the time to remortgage because…

You have little mortgage left to pay. If your debts are quite small, the fees involved in remortgaging will be high enough that it’s not worth the hassle of going through the process. Some mortgage lenders won’t even take on a mortgage if it’s for an amount below £25,000. Even if your interest rate is quite high, it might be worth powering through with your repayments if the end is in sight.

 The value of your house has dropped. And if you’ve not made significant headway into paying off your mortgage, it may be that you now own a smaller portion of your home’s value than you did to begin with. You might even be in negative equity, where your outstanding mortgage debt is higher than the value of the property. It is unbelievably difficult to remortgage if this is the case, so you may want to try and wait out the drop and see if the value of your property increases again. 

The early repayment rate is high. If you decide you’d like to remortgage and your incentive period isn’t over, a mortgage lender will charge you an extremely large fee for leaving. It could literally cost you thousands of pounds to change to a mortgage that will only save you a few hundreds of pounds in the long run, meaning you’re worse off after making the change. If you’re really set on leaving your current mortgage provider, speak to the lender and see if you can be switched to one of their other deals, which has a lower early repayment rate. Although the interim deal may not be the best one available to you, this will save you a small fortune when you do then remortgage with a different company.

However, remortgaging is a costly process. You need to pay an exit fee to your old lender, a joining fee to your new lender, and a couple more people like solicitors and valuators along the way to keep the process going. After weighing up all of these costs, you may discover that it’s actually more cost effective to remain with your current mortgage, at least for the time being. Therefore, you’ll need to work out the actual cost of remortgaging and compare this to the savings you’ll make by changing your mortgage rates.